Tech Reopening Plays Such as Expedia and Lyft Soar on Pfizer's Vaccine News

Tech companies seen as well-exposed to areas such as travel and dining spend are rallying, as are many enterprise hardware and chip equipment stocks.
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While stay-at-home plays such as Zoom, Peloton and Wayfair are falling sharply following Pfizer’s vaccine announcement, tech companies seen as beneficiaries of reopening are registering big gains.

Online travel stocks are among Monday’s big winners after Pfizer  (PFE) - Get Report reported a 90%-plus efficacy rate for a COVID-19 vaccine trial following the delivery of a second dose. As of the time of this article, Expedia  (EXPE) - Get Report is up 23.4%, Booking  (BKNG) - Get Report is up 14.8%, TripAdvisor  (TRIP) - Get Report is up 17.8% Trivago  (TRVG) - Get Report is up 27.3% and Travelzoo  (TZOO) - Get Report is up 14.8%.

Ride-hailing platforms Uber  (UBER) - Get Report and Lyft  (LYFT) - Get Report are up 8.4% and 21.5%, respectively (Lyft’s gains come ahead of a Q3 report due on Tuesday afternoon). Local business reviews platform Yelp  (YELP) - Get Report is up 21.1%, events management/ticketing platform Eventbrite is up 31.1% and car-buying website TrueCar  (TRUE) - Get Report is up 7.0%.

Enterprise hardware and telecom equipment stocks are also generally faring well, as investors bet that reopenings and a more normalized macro environment will lead demand to pick up in these areas. Nokia  (NOK) - Get Report is up 4.8%, Cisco Systems  (CSCO) - Get Report is up 3.1%, Hewlett-Packard Enterprise  (HPE) - Get Report is up 6.9% and F5 Networks  (FFIV) - Get Report is up 6.3%.

In addition, many tech companies whose sales are tied to manufacturing activity are rallying. This includes contract manufacturers such as Sanmina  (SANM) - Get Report (up 6.1%) and Fabrinet  (FN) - Get Report (up 3.7%), and chip equipment makers such as Applied Materials  (AMAT) - Get Report (up 3.6%), Lam Research  (LRCX) - Get Report (up 4.0%) and Teradyne  (TER) - Get Report (up 3.5%).

These gains, it should be noted, come even though much still remains unknown about how quickly Pfizer's vaccine, which requires ultra-cold storage, can be manufactured and distributed on a large scale, should it be as effective as hoped.

And for the online travel, events and local business plays, Monday’s gains in many cases follow the arrival of Q3 reports that suggest near-term business conditions still remain rough.

Expedia and Booking, for example, reported 58% and 48% annual Q3 revenue drops, respectively, while also indicating that European travel spend has come under renewed pressure in Q4 as COVID-19 cases spike. And while Uber reported that its Mobility (ride-sharing) bookings nearly doubled sequentially in Q3, that was still down 50% annually.

Companies depending heavily on on-premise enterprise hardware spending have also been struggling in many cases. Cisco’s revenue was down 9.5% annually during its July quarter, while HPE’s was down 5.6%. Cisco’s October quarter report arrives on Thursday afternoon.

Along with reopening optimism, a broad rotation towards low-valuation stocks -- and out of richly-valued stay-at-home names -- could be giving some of the aforementioned stocks a boost.

Cisco, for example, went into Monday trading for about 12 times the EPS consensus for its July 2021 fiscal year, while F5 was trading for 15 times the consensus for its Sept. 2021 fiscal year. Fabrinet was trading for 16 times the consensus for its June 2021 fiscal year, and Applied Materials was trading for 16 times the consensus for its Oct. 2021 fiscal year.